The increased accessibility of e-commerce, as well as rising ambitions and a jump in discretionary spending, are driving increasing demand for retail space in the country’s Tier II cities. 

According to a survey produced by real estate consulting company CBRE, over 30 significant domestic and foreign retail brands joined 14 tier-II cities between January and September of last year, demonstrating the rising popularity of big non-metros among organized retailers.

The 14 cities include Chandigarh, Jaipur, Indore, Goa, Mangalore, Kochi, Lucknow, Patna, Ranchi, Guwahati, Bhubaneshwar, Vizag, Mysore, and Coimbatore

Between January and September, the total retail space supply in these 14 cities was 2.4 million square feet, with Chandigarh, Jaipur, and Lucknow leading the way. Meanwhile, Kochi, Jaipur, and Goa have the highest overall retail space absorption among the 14 cities. The absorption rate is the rate at which retail premises are sold during a certain period. 

According to the survey, major local and international retail companies, including Croma, Armani Exchange, Malabar Gold & Diamonds, Reliance Smart, Tanishq, H&M, Marks & Spencer, GAP, Starbucks, Pizza Express, and Under Armour, have increased their retail presence in these cities.

According to the research, the total retail stock in these 14 cities was 29 million square feet as of September 2023, with Jaipur, Lucknow, and Chandigarh having retail stock ranging from 3 to 7 million square feet apiece.

Anshuman Magazine, CBRE’s chairman and CEO for India, Southeast Asia, the Middle East, and Africa, said that a combination of increased e-commerce reach, rising ambitions, and an increase in discretionary spending is driving up demand for retail space in these regions.

Investment-grade developers are building large-scale modern malls in major cities, which are seen as an entertainment destination rather than merely a place to shop. Most non-metropolitan cities are well-established trade and business centers, with international businesses and startups setting up headquarters as well. The growing population in tier-II cities is driving demand for a wide variety of retail products,” he added.

Tier-II cities have seen a significant increase in retail development during the previous three years. India’s first retail REIT has pushed developers to consolidate and renovate existing facilities rather than build new malls. Furthermore, local and international fashion businesses are trying to grow in non-metropolitan areas, driven by a well-informed and well-traveled customer base,” said Ram Chandnani, managing director, of consulting & transactional services, at CBRE India.

In recent years, retail development has increased in cities like as Chandigarh, Jaipur, Goa, Indore, and Lucknow.

Chandigarh has risen to become an important retail market in Punjab as a result of its wealthy customer base, well-planned infrastructure, economic development, tourism, and the presence of local and international retail brands. Chandigarh, together with its sister towns Mohali, Panchkula, and Zirakpur, has developed as a significant retail destination, providing a robust market for growth and development,” the report said. 

Zara, Uniqlo, Lifestyle, Shoppers Stop, Marks & Spencer, The Collective, Nike, Adidas, Skechers, Puma, Frontier Raas, Taco Bell, and Ritu Kumar are among the companies that have already established themselves in the city.

Meanwhile, cheaper operating costs, a strong skill pool, and proximity to Delhi-NCR have assisted Jaipur’s retail growth. The Lucknow retail real estate market, on the other hand, is experiencing strong growth due to several factors, including rapid urbanization and a growing middle class, rising consumer spending, the emergence of new shopping malls and high-street retail formats, and the expansion of domestic and international retail brands.